Areva T&D bid: Alstom, Schneider victorious

Areva T&D bid: Alstom, Schneider victorious

Madrid: Alstom SA and Schneider Electric SA said they are in exclusive negotiations with Areva SA of France for its power grid unit, knocking out overseas bids from General Electric Co. and Toshiba Corp.

Alstom, which makes high-speed trains and energy generation equipment, and Schneider, a maker of electrical circuits, bid €4.09 billion (around Rs28,500 crore) for Areva T&D, the nuclear reactor company said on Monday. The French state, which owns 91% of Areva, expects to complete the transaction in 2010.

The sale keeps the third largest provider of power transmission and distribution (T&D) equipment in French hands and returns parts of the business to Alstom, which had sold the unit to Areva for €920 million in 2004 to help avoid collapse. GE said it was “disappointed in the outcome", after chief executive officer (CEO) Jeffrey Immelt had travelled to Paris to help clinch the deal in negotiations with the French government.

“Alstom’s win allows the French Industrial Jewel to regain some of the lustre it lost and participate in the rapid build-out of new transmission infrastructure in emerging countries," Ben Elias, analyst at Sterne Agee and Leach, said in an email. Elias has a “neutral" rating on the Areva stock.

The two companies said they will divide the unit, with Alstom taking the transmission business, which accounts for two-thirds of Areva T&D, and Schneider owning the distribution business. The decision to pick the French team followed an examination of the bids on Monday, Areva said.

Paris-based Areva trails ABB Ltd and Siemens AG in the global power grid market. French President Nicolas Sarkozy orchestrated the sale to Areva in 2004 as finance minister to avert Alstom’s breakdown, and Areva is now selling it on to fund expansion in the global nuclear power market.

The T&D market’s growth is tied to overall power demand, which Areva estimates will double by 2030. Areva operates in at least 100 countries.

Areva T&D, which builds and operates electricity grids, accounted for 38.5% of Areva’s sales last year. The global economic slump and start-up costs for plants in India and China narrowed the operating margin at the unit to 7.1% in the first half from 11.1% a year earlier, Areva had said on 31 August.

Areva CEO Anne Lauvergeon wants to raise as much as €10 billion to expand its nuclear business in the next two years. The company, which built 91 of the world’s 439 active nuclear reactors, predicts global demand for nuclear power will grow 5% each year until 2030.

To help raise funds, Areva plans to sell a 15% stake to investors after the sale of the unit and reiterated this on Monday.

Alstom said in a statement on Tuesday on its website that it has undertaken “strong commitments" with Schneider regarding employees at Areva’s power grid subsidiary. There will be no site closures at the T&D unit up until 2013 and there is “no mass redundancy plan", it said.

Pavel Alpeyev in Tokyo, Rachel Layne in Boston and Ben Livesey in London contributed to this story.